GRAIN MARKETS - David Sheppard, managing director
WHEAT
The Ukrainian parliament has allowed the government to sell grain export quotas at auctions. Pakistan is expected to produce at least 25million tons of wheat in its 2010/11 crop, higher than initial thoughts following the lifting of an export ban in December. The country has already exported, or contracted to sell about 1.5million tons of wheat.
Algeria’s Agriculture Ministry has issued preliminary drought warnings for several grain-growing regions, and reported that the absence of rain since the start of the month was stressing cereal crops.
USDA reported corn plantings at three percent complete as of Monday, similar to last year and the average. However, traders believe that farmers are sowing the crop more slowly than expected, increasing concerns they may not expand acres as much as previously projected to rebuild low stocks.
USDA reported 36 percent of the winter wheat crop in good/excellent condition down one percent on the week. This represented a fall of one percent in HRW, unchanged ratings in SRW and a three percent increase in White wheat.
AgriMer reported yesterday that French soft wheat exports outside the EU will likely hit a record 12.8 million tons for the season. Endings stocks were projected at 2.3 million tons, down from 3.4 million tons in 2009-10. Strategies Grains leaves its EU-27 2011 soft wheat production estimate unchanged at 135.2million tons, up seven percent from 2010.
The USDA report released last week, leaving US corn stocks unchanged, did little to calm the markets as corn continued to rally to new highs. Plantings have only just started and, over the next few weeks, markets will remain nervous as weather issues and plantings progress becomes closely monitored.
Market fundamentals still point to a bullish scenario, with tight global stocks and many weather related issues regarding new crop wheat prospects.
However, a Goldman Sachs recommendation to ‘book profits’ before a market reversal has encouraged investors to cash out long positions, bringing markets off the recent highs and consumer buyers of old crop wheat in the EU and the UK are few and far between. It remains to be seen who will be proved right in the end.
OILSEED MARKETS - Jonathan Lane, trading manager
Oilseeds opened on a strong footing on Monday, initially attempting to shrug off bearish USDA data, but gains were limited and prices trended lower as South American Soybean supplies relieve the strain on the tight US balance sheet.
Chinese demand for the oilseed complex appeared to be slowing. China announced that it might cancel some of its Soybean booking on the belief that it has overbooked purchases. This, coupled with an escalating threat of radioactive release from the damaged nuclear power plants in Japan (a disaster which has been compared to Chernobyl), added further weight to a market that has seen some strong gains over the course of the previous weeks.
Markets finally broke sharply lower as Goldman Sachs issued a recommendation to investors to trim and book profits on commodity positions. This added pressure to a market that was already on the back foot due to demand concerns from China, and fresh South American supplies providing some relief to the US balance sheet.
On the domestic market, prices were very volatile and trade was limited. Cash markets lagged behind the futures as crushers have mostly covered old crop requirements. Going forward, global tight supplies are still a concern as farmers are seen to expand corn plantings at the cost of soybeans. Tight supplies and uncertainty surrounding the acreage planted in a year where oilseed supplies are limited may underpin prices going forward.
This blog is written by Martin Little The Global Miller, published and supported by the
GFMT Magazine and
International Milling Directory from
Perendale Publishers
